Renewable Energy: The Outlook for Supplying Energy to Remote Regions

Key conclusions

Energy reform shocked the power sector

“The creation of a wholesale market in Siberia and Europe attracted $300 billion of investment into the energy sector in just one year (2008). Following this, over the past 10 years, the energy sector has received a huge investment surge, something that hadn't happened in the previous 40 years. The foundation for this upsurge was the creation of a market in Siberia and Europe,” said Anatoliy Chubais, Chairman of the Executive Board at RUSNANO Corporation.

All prerequisites for cultivating renewable energy in the Far East are in place

“All of the prerequisites for one-time renewable energy projects in the Far East are already in existence, and step-by-step it is both possible and necessary to make it so that a one-time project becomes standard in the Far East and comparable to the scale of projects that span all of Russia,” Anatoliy Chubais said.

Far East pays down debts and awaits investment

“The total amount of investment over the next 5 years is in the region of 250 billion rubles. This is about 50-60% of the company's investment load. There are four objects that are under construction by presidential decree The debt problem of Far East generation has been settled. About 55 billion rubles have already been repaid,” said George Rizhinashvili, Member of the Management Board and First Deputy Director General at RusHydro.

Energy efficiency in the Far East is on the rise

“The larger the price load within the region, the more the cost balance rises from an increase of 1 megawatt of power efficiency for the region because it unloads the total load on the end user. And when it comes to cost balance this load can drop more than 50%; this coefficient, i.e. 30% power, allows for 50% to unload the cost balance inside zones isolated from the mode of operation,” George Rizhinashvili explained.

Challenges

High cost of energy resources

“The delivery of fuel at a number of points in a number of settlements occurs up to 7,000 kilometers. This is, of course, reflected in the prime cost of 1 kilowatt per hour. For example, in the Magadan Region, we import diesel. The price reaches 75,000 rubles. If we compare that to the Moscow regions, it is 34,000 rubles. That is to say, it is twice as high,” said Anton Inyutsyn, Deputy Minister of Energy of the Russian Federation.

No guarantees of reliability when it comes to renewable energy in the Far East

“There is no concrete certainty that these technologies, which are in such remote territories and in such difficult climate conditions, will truly be reliable and guarantee energy supply,” Anton Inyutsyn explained.

Renewable energy market not attractive enough to investors

“In the Far East, it was impossible to create a market. This is specifically why Far East energy is substantially less attractive as an investment object,” Anatoliy Chubais noted.

“The entire Russian national project for launching renewable energy is based on the idea of contracts for supplying power that is working on the wholesale market. Again, there are no contracts here in the Far East for supplying power; there is no wholesale market here,” explained Anatoliy Chubais.

Solutions

Creating a regional wholesale energy market

“Recently the government submitted a proposal for the creation of the Far East Renewable Energy Fund What it comes down to is the size of the investment market in the amount of 800 billion rubles to 1 trillion rubles,” said Anatoliy Chubais.

Securing returns on investment

“The most important thing here, from an investor’s point of view, is the possibility to get a return on investment Or there will be confirmation for some minimal payback period, so then it will not be RusHydro, Hevel, or some other company. It will be a market; a market with competition and many companies will try to implement this on their own However, no subsidies are needed. Companies are able to bring in their own money and the only thing that needs to be guaranteed is that this money can be returned,” said Igor Shakhray, General Director of Hevel.

“Facilities need to be built, that is, money needs not just to be provided, but this money needs to be poured into constructing facilities and these facilities need to provide turnover,” said Denis Askinadze, Deputy General Director of the Far East and Baikal Region Development Fund.

“In these renewable energy projects, it is advisable to consider the possibility of cogeneration of electric thermal energy. Then much less diesel will be consumed and the return on investment will also increase. That is to say that with the existing tariff, because of all these measures, we will be able to satisfy the return on investment for Yakutia in just a little more than 5 years,” explained Igor Dubovskiy, Director of the Investment Department of the Far East Investment and Export Agency.

Creating an energy storage system

“In order for these solar stations to gain momentum, it is necessary to have storage facilities because without them we will have no place to put this energy,” said Nikolay Duraev, First Deputy Minister of Housing and Utilities and Energy of the Republic of Sakha (Yakutia).